Tax Tips Blog Posts
May 17, 2017
Just because tax season is over, doesn’t mean that you’re done with nasty taxes for good (though even we wish this were the case!). Do yourself a favor and avoid the toxic anxiety tax season welcomes by taking just a few easy steps to stay organized for next year.
1. Look over your withholdings – no one wants to have more money taken away from them than necessary obviously. So it always shocks us when people who have employers that withhold money from their paycheck automatically don’t take the time to make sure the correct amount is getting taken out!
2. Evaluate your retirement plan – be honest; are you really saving enough for retirement? Most Americans have no idea, as a Bank of America Merrily Lynch survey found that 81% of Americans don’t know how much money they will need for retirement! So it’s very important to be aware that IRS limits on tax-deductible IRA contributions can change from year to year.
3. Make an income forecast and estimate possible taxes – all businesses regularly project how much revenue they expect to gain over the year in order to gauge expenses. Treat yourself and your family like your own business and do some serious thinking about how much money you’ll think you’ll have over the year, including possible major expenses (especially unexpected ones), and what you might have to pay in taxes.
Taxes aren’t fun, but that doesn’t mean they have to be torture. Do your future self a big favor and ease the stress by taking some easy proactive steps. Your future self will want to hug you for your efforts!
May 3, 2017
Tax and Health-Care Reform Back in the Spotlight
Republican efforts to repeal and replace the Affordable Care Act (ACA) failed in late March. In the immediate aftermath, it appeared that health-care reform efforts would be set aside in favor of advancing a tax reform agenda.1 Then, in a one-two punch that surprised many, the White House called for a vote on a revised repeal-and-replace health-care plan and announced the broad outline of a new tax reform plan.2 It would be a mistake to consider the two completely separate efforts, because in some ways they are actually closely connected.
White House announces new tax proposals in broad terms
The tax reform plan announced by the White House includes reducing the current seven tax brackets to just three: 10%, 25%, and 35%. It proposes doubling the standard deduction amount and eliminating both the alternative minimum tax (AMT) and the federal estate tax. The plan would preserve existing deductions for home mortgage interest and charitable donations, but would eliminate most other deductions, including the ability to deduct state and local taxes.3 Essentially, this was a "stake in the sand" to establish a starting point for negotiations with Congress. Details must be determined, and changes are likely as discussions progress.
Tax provisions also a part of health-care reform
The ACA contains significant tax provisions, including the 3.8% net investment income tax and the 0.9% Medicare payroll surtax, which both target high-income individuals. The initial repeal-and-replacement effort would have eliminated or modified many ACA tax provisions — that's almost certain to be true for a revised plan as well. And any health-care reform package is likely to balance lost tax revenue with reductions or limits to subsidies and Medicaid outlays. If the ACA tax provisions are not addressed in a health-care reform package, they're likely to be included as part of the tax reform discussion, increasing the scope and complexity of the tax debate. In fact, the White House tax reform announcement specifically called for repeal of the 3.8% net investment income tax.4
Further complicating the issue, Republican legislators — who lack 60 votes in the Senate to overcome a Democratic filibuster — plan to use a process called budget reconciliation to pass both health and tax reform legislation with a simple majority vote. Under budget reconciliation rules, any reform measure must not increase the federal deficit beyond a 10-year period. This restriction means that unless tax cuts are offset by revenue savings elsewhere (e.g., spending cuts or reduced deductions), they must expire after 10 years.
1) See for example Nick Timiraos and Richard Rubin, "GOP Shifts Focus to Next Target: Tax Code Revamp," Wall Street Journal, March 25, 2017
2) John T. Bennett, "White House: Final Health Care Deal Unlikely This Week," Roll Call, April 26, 2017, and Briefing by Steven Mnuchin, Secretary of Commerce, and Gary Cohn, Director of the National Economic Council, April 26, 2017, whitehouse.gov
3,4) Briefing by Steven Mnuchin, Secretary of Commerce, and Gary Cohn, Director of the National Economic Council, April 26, 2017, whitehouse.gov
April 18, 2017
Whether you choose to do your taxes yourself, or have a tax professional sift through the mess for you, it’s vital to be aware of changes in the tax codes. Understanding these changes will help you make decisions which result in growth for your business and avoid dangerous pitfalls which sink all of your hard work.
This could be the final year of “bonus deprecation”
Bonus deprecation is a rule which allows businesses to deduct 50% of the deprecation value of certain equipment and software purchases made in the first year. It’s anticipated that the allowed percentage will fall in the coming years.
Filing deadlines have changed
Deadlines for several different kinds of businesses have changed. C-corporations which use IRS form 1120 need to file their taxes by April 15th. S-corporations who use form 1120-S now need to file by March 15th, as do partnerships that use form 1120. Not filing on time is one of the biggest mistakes entrepreneurs make, which often lead to huge penalties from the IRS.
Section 179 has changes as well
Section 179 of the tax code allows businesses to deduct $500,000 from purchases that do not cost more than $2 million. There are some requirements to use this deduction, such as using the equipment the same year it is purchased, as well as being used for business purposes at least 50% of the time.
As you can see, and most likely already know, handling your business’s taxes is no easy feat. But a clear picture of this landscape is a necessary evil in order to gain an understanding of your financial obligations and to become aware of any needs for loans. If it ever becomes too much and you want a helping hand, we’re always here to offer our guidance.
March 23, 2017
Tax season sends shivers down the spines of most people, but it doesn’t have to be that way! Using some little known tricks, CPAs and their clients alike can very easily save big money when filing their reports.
1. Job Search Expenses Tax Deduction
Did you know that you can deduct some of your job search related expenses? If you’re looking for a job in the same field you’ve been working in (so dreamers who quit their jobs for Hollywood are out of luck) are eligible for certain deductions like travel expenses for interviews, among many others.
2. Home Renovation Tax Deduction
Want to renovate your home without tightening your belt? Then you’ll want to know how many home renovations can actually qualify for tax write-offs. From taking advantage of tax energy credits to implementing home improvements which count as medical expenses to using your mortgage for renovations, there are a myriad of ways in which you can spruce up your home while saving money at the same time.
3. Tax Preparation Fees Deduction
While tax preparation fees are an allowed deduction, it’s extremely important to note that in order to be eligible for it, you must have all your deductions itemized and the sum of your miscellaneous expenses must exceed 2%. This is where the pros can come in handy!
4. Jury Duty Pay Tax Deduction
Standard expenses like vehicle mileage, phone usage, and meals (up to $100, so don’t take this as an opportunity to dine at Ruth’s Chris!) can all be deducted from your taxes. Keep track of your spending next time you’re bored at jury duty. Just don’t let your accounting keep you from paying attention to the trial!
5. Penalty of Early Withdrawal Tax Deduction
This tip saves money in a very different way than the others on this list. If you use money from your IRA before the age of 59 ½, you’ll be slapped by the IRS with a 10% penalty which cannot be deducted. So it’s vital to consult with a financial advisor before making any rash decisions.
Not all of these tips and tricks will apply to everyone, but even being aware of just one of them can save a ton of money. Maybe instead of giving up your hard earned cash to Uncle Sam, this year you’ll be able to use it for the things you actually need!
February 7, 2017
Don’t Let Taxes Disrupt Your Retirement Plans!
January 30, 2017
Get More Back On Your Tax Return!
- Every return prepared by a CPA – reduces your taxes and minimize risk
- We File All Individual & Business Returns
- We’re here year-round to handle all your financial needs:
- Investment, Retirement, Estate & Tax Planning
- Wealth Accumulation, Preservation & Asset Protection
- Small Business: Tax Reduction, Profit Improvement, & Bookkeeping
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January 14, 2017
5 Tax Season Tips For 2016 Tax Returns
Smart tax planning is knowing all the available deductions so you don’t miss out on saving tax dollars. Increase your tax returns with these tax savings tips for your 2016 tax returns.
- Maximize your employer 401(K) match. Your employer may match part of your own contributions with their employer match percentage. This is free money from your employer for 401(K) retirement. This may also put you in a lower tax bracket, when you file your taxes and you may get more money back.
- Don’t forget to make your yearly traditional IRA contribution. You can still make your 2016 contribution up to April 15, 2017. Contributing to an IRA may help you receive more tax dollars back. It also helps to build your savings for retirement.
- Take the required minimum distributions (RMD) from your retirement if you are 70-½ or older. For people who just turned 70-½ in 2016 take your first RMD before April 1, 2017. If you wait until the next year it may put you in a higher tax bracket.
- Tax-Preferred Education 529 Savings Plan- The 529 plan is a college savings account, which is exempt from taxes. This plan will help pay for high college expenses. Your state may also offer tax benefits for residents in the state. It is only for states that file income tax. Each state has different maximum dollar amount for the 529 savings plan so it’s wise to check the maximum allowance for your state. Learn more about the 529 plan with IRS’s questions and answers page.
- Coverdell Education Savings Accounts. If you qualify for the modified adjusted gross income (MAGI) the amounts deposited are tax-free until distributed. The education savings accounts have a maximum allowance for the total contributions each year. This education savings plan will help higher education expenses, elementary and secondary school expenses.
Retirement Planning For Increasing Your Tax Deductions
Retirement contributions make great tax deductions. Your retirement planning will help you save money on your tax filing. Putting money away for retirement can cut your income tax you owe. Take advantage of these retirement savings tax deductions and watch your retirement money grow. It is also a great time to start and plan your retirement or go over the retirement plans you already have. Big Financial offers tax services that will guide you through your retirement planning in North Royalton & Cleveland Ohio. Don’t wait, take advantage of these retirement savings deductions today!
November 28, 2016
When going in to file your 2016 taxes you need to know where you fall in regards to your tax bracket.
We've conveniently listed here the 2016 tax bracket chart so you can quickly see where you land.
Contact Us About Your Business, Finance, Accounting or Tax Needs
September 16, 2016
We are at the end of Q3 for 2016 and you need to be thinking about taxes for your business.
We have put together 3 critical tax tips for Freelancers.
Be accurate about your earnings
Freelancers are susceptible to audits, so don't want make any big errors when it comes to reporting your earnings. Of course, you'll be getting 1099 forms from your clients, but only if you did enough work with them.
If you've done a bunch of tiny jobs this year, the government wants to know about that income. Go back through your invoices and make sure you know what you actually earned.
Know your deductions
Deductions are business expenses you can deduct from your taxable income. For example, if you made $60,000 last year but spent $10,000 on business expenses, you only have to pay taxes on $50,000.
Below are the most common deductions for a freelancer:
- Office supplies
- Books, magazines, reference materials
- Telephone/Internet service
- Office rent
- Gas and electric
- Messengers, private mail carriers, postage
- Business insurance
- Tax preparation
- Business meals and entertainment
- Business loan interest
- Legal and professional fees
- Taxes and permits
- Home office space
Be sure to talk to your tax professional before claiming major deductions, as there are often specific stipulations for each write-off. For example, if you're primarily working from home, you can only write off the amount of square footage that's used as a dedicated workspace.
But claiming a crazy amount for certain deductions can trigger audits. If a deduction you're making seems unreasonable to you, chances are the government will think so too.
Know your forms
The government likes to make their forms extremely confusing & extremely similar. Here are the ones you should probably be familiar with:
W-9: You should have already filled out this form for the companies who hired you. Just basic info here: social security number, name, address. Not a form you're going to have to worry about now.
1099: This is the form your clients will send to you by late January or early February, assuming you did more than $600 worth of work for them. Again, this is a fairly simple form listing the amount of money the client paid you — also known as the amount of money you now owe taxes on.
1040: You'll use this form to file your income taxes. There are three different types of 1040 forms: 1040, 1040A, and 1040EZ. They are basically the same thing. The only difference is the amount of information required to fill them out. For example, the 1040EZ form doesn't allow you to claim dependents. To keep things simple, just fill out the 1040 form. It has everything you need.
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March 4, 2016
PAY LESS TAXES TODAY WHILE SAVING FOR RETIREMENT
“The more money I make, the more taxes I have to pay, so how can I save for retirement?!”
YES you can pay lower taxes and save for retirement at the same time for example through income deferral and tax-free income generating “vehicles”.
Sheltering your earned income involves employing one or more tools to minimize your current federal tax burden. There are different types of income, but earned income may be defined as wages, salaries, tips, and other employee compensation, plus net earnings from self-employment. Although numerous opportunities exist to shelter earned income from taxes, the more widely used methods include making contributions to traditional deductible IRAs and participating in employer-sponsored retirement plans. By contributing to retirement “vehicles”,
you lower your current taxable income.
Although income is usually taxable, there are a number of vehicles that can produce taxfree or nontaxable income. You may be able to enjoy some portion of your income, tax free, by switching some of your investment money to these vehicles. Vehicles to consider include Roth IRAs and tax-exempt bonds.
How much income do I need for retirement?
It’s common to discuss desired annual retirement income as a percentage of your current income. Depending on who you’re talking to, that percentage could be anywhere from 60 to 90 percent, or even more.
Calculate the gap.
Once you have estimated your retirement income needs, take stock of your estimated fu- ture assets and income. These may come from Social Security, a retirement plan at work, a part-time job, and other sources. If estimates show that your future assets and income will fall short of what you need, the rest will have to come from additional personal retirement savings.
What works for one person isn’t always the best for another.
Every individual and family has different goals and circumstances to be considered. The cliché of “one size fits all” isn’t the right solu- tion when you’re talking about your financial future. With all the options out there: Traditional IRA; Roth IRA; Employer plans such as 401(k), 403(b), 457(b); Annuities, Life Insur- ance, Mutual Funds, etc., how do you know what is right for you?
We are happy to help determine the best way for you to meet your goals for retirement planning, tax planning, and small business ac- counting. We are currently offering a 20% discount for tax preparation services to new clients, both individual and business. Call 440-884-1400 today for more information.
Originally Published by the Gazette Newspaper in Brecksville, Ohio.